Callaway's book-apps are a mixture of brands and its own titles, like Miss Spider

The world of book-apps is a crowded place, with traditional publishers jostling with developers and startups (and sometimes collaborating with them) to explore the creative potential of digital books, and how to make money from them.

Callaway Digital Arts has been one of the more high-profile book-apps startups ever since it was spun out from book publisher Callaway Arts & Entertainment in the early days of the iPad.

Its first title, Miss Spider's Tea Party, received plenty of attention, and since then the company has made book-apps for brands including Sesame Street, Thomas & Friends and Martha Stewart, while also raising $6m from venture capital firm Kleiner Perkins' iFund.

In October 2011, chief executive and founder Nicholas Callaway stepped aside to a role as chief creative officer, to be replaced in the CEO role by Rex Ishibashi. His background is in the games industry, as president of Electronic Arts Japan and chief executive of social games firm Ohai.

He traces a line back from what's happening in apps now to "edutainment" companies like Broderbund and The Learning Company in the 1980s, and later companies like LeapFrog Enterprises that focused on hardware and software. "Those companies were successful in addressing the edutainment market, and creating brands of real value," he says.

"Broderbund and The Learning Company became billion dollar-plus companies, but then crashed and burned and are now smaller segments of larger companies. LeapFrog also had a big valuation before coming right down. But what we have now [with apps] is an ecosystem where we can create edutainment products in a way that's sustainable."

So far, Callaway has released 10 apps: three based on Martha Stewart's lifestyle brand, and the other seven a mixture of own-IP and branded apps for children. Ishibashi's first job as chief executive has been to decide whether the company should specialise in one of those two areas, or continue exploring both.

"We know for sure that based on both licensing agreements and our own IP, we will absolutely be a major player in the kids market," he says. "As a startup company, focus is incredibly important, so when I look at the kids market, there is so much opportunity there in and of itself, that may be where we end up focusing. But I'm a few weeks in to the job, so we are still evaluating how broad our portfolio may be, including other segments."

It's a fascinating time to be making book-apps for children at the moment, as companies explore how best to blend traditional storytelling with interactivity, animation and gameplay. Fellow startups like Mindshapes, Ideal Binary, Nosy Crow, Toca Boca and others all have their own take on how those elements should be blended together.

Callaway's roots may be in traditional publishing, but Ishibashi's background in the games industry hints at where the company sees this going in the future.

"We'll be playing somewhere between e-books and games, experimenting and pushing towards even more immersive experiences that start to feel like games," he says.

"That said, we're talking about a segment that's three through eight [years old], and traditional storytelling is incredibly important. We'll be experimenting a lot with what makes immersive interaction on a touchscreen, and exactly how deep those experiences should push into games."

Like its rivals, Callaway is aiming to become a recognised brand in its own right – recognised by parents, specifically, who are choosing which apps to buy for their children to use.

Cross-promotion is an important part of that: the ability to tell parents who've bought a Thomas & Friends book-app about a new title in the series. It's the power of the network, again – something that most developers now realise is just as important to cultivate as Apple featured promotions on the App Store.

Thus far, Callaway's apps have been iOS only, like a number of book-app publishers – rival Oceanhouse Media is one of the few companies in this space to be regularly launching book-apps across iOS and Android simultaneously.

"We're still evaluating the Android business system," says Ishibashi, who admits to being very interested in seeing how Amazon's new Kindle Fire tablet does.

"Currently, Android is largely appealing to an audience that's younger, male and generally doesn't have kids. But my understanding of Kindle Fire is that it's a device intended to be used by the family to consume digital media. But we think there's plenty of growth in iOS yet too."

The perception of Android as a young, male-centric platform should change in 2012, partly due to tablets like Kindle Fire and Nook Tablet, but also because Android smartphones are being sold in large numbers at the high end as an alternative to the iPhone, and lower down as affordable entry-level smartphones.

The recent launch of the Famigo Sandbox Android app, which provides recommendations of child-friendly apps, hints at demand from Android-owning parents.

When Ishibashi joined Callaway, the company had another piece of news: the appointment of Kleiner Perkins partner Bing Gordon as a strategic and creative advisor. Formerly chief creative officer at EA, Gordon has since led investments in Zynga and ngmoco. A man with clout, to say the least. His involvement with Callaway can be seen as an important bet on the book-apps market.

"It wasn't a co-incidence that he joined us at the time he did," says Ishibashi. "It was one of the key drivers in the early stages of my discussions with the company and Kleiner Perkins to get me here. We have a loose commitment around the amount of weekly time we spend together, and I consider him to be an oracle of ideas that we haven't yet fully thought of, and positions we could possibly take the business."

Gordon's involvement may also hint at a large second round of funding to come for the company. Later in our interview, Ishibashi talks about encountering parents whose children are using book-apps, including when "talking to potential investors", so there may well be more news to come on this score.

In the meantime, the company is working on its next apps: one for Sesame Street and one for Thomas & Friends this year, with more Martha Stewart apps and a "nice pipeline" for the first quarter of 2012. Ishibashi is also enthusiastic about the potential for creative exploration of these new digital formats.

"For 10 years I've been saying that the best digital should feel like the ultimate analogue," he says. "That's what we finally have with iPhone, iPad and Android devices, and we're anticipating a lot with the Kindle Fire as well. These devices are physically connected, human intuitive and easy to develop for as well."